Thousands of people have lost millions of dollars to tax scams in recent years, according to the IRS. The problem is so prevalent that the IRS compiles an annual “Dirty Dozen” list of the worst tax fraud scams.
Scam artists routinely spring into action around tax filing season. Don’t be a victim of a tax scam — familiarize yourself with five common ways criminals might try to take your money, so you can be prepared if it does happen to you. And if you do become a victim of tax fraud, take immediate steps to clear your name before too much damage occurs.
Beware of Phishing Scams
Tax scam phishing happens when criminals send fake IRS emails to try and get you to share personal information like website passwords and credit card numbers. During the 2016 tax season, there was nearly a 400 percent increase in phishing incidents, according to the IRS.
The IRS sends letters and notices only — its agents do not call, text or use social media to gather or confirm your financial or personal information. If you receive an email that looks like it’s from the IRS, don’t open it. Report any unsolicited email you suspect involves phishing to the IRS at firstname.lastname@example.org.
Guard Against Phone Scams
You might receive a phone call from someone pretending to be an IRS agent asking for your personal information. He might threaten you with a lawsuit if you don’t comply, or tell you that you have a refund due.
New phone schemes are constantly emerging. For example, the U.S. Treasury Inspector General for Tax Administration warns that telephone scammers impersonating IRS tax collectors might demand payment for your “tax debt” from a prepaid debit card, wire transfer or iTunes gift card.
From April through September 2016, more than 9,000 victims were tricked by an IRS impersonator through a scam phone call. These victims turned over more than $49 million to scammers, according to TIGTA’s semi-annual report to Congress. The good news is that TIGTA worked with phone companies to disconnect more than 92 percent of the scammers’ phone numbers.
Hang up on any scam phone calls immediately. Remember, the IRS does not call people as the first point of contact and an IRS lawsuit call virtually never happens. IRS impersonation scam reporting can help others avoid being ripped off so if you’re a victim, make sure you file a complaint on the TIGTA website.
Look Out for Tax-Related Identity Theft
Criminals steal your personal information to file a phony tax return in your name and snag a big refund. When you file your legitimate return, it might get rejected as a duplicate filing.
The Security Summit — a collaborative group consisting of the IRS, state tax agencies and tax professionals — has helped reduce the number of taxpayers who reported identity theft in 2016 on their federal tax returns. In 2016, nearly 275,000 fewer people were victimized than in 2015.
If you’ve been the victim of identity theft, report it immediately to the Federal Trade Commission. The FTC is the federal government’s one-stop resource for identity theft victims and it provides streamlined checklists and sample letters to guide you through the recovery process.
Find Out: How to Report Tax Fraud
Vet Your Tax Preparer
Many taxpayers seek professional assistance to prepare their returns. It’s crucial to choose a reputable company or you could be scammed.
Scam artists often pose as tax preparers during tax season and lure victims by promising large refunds. They might use flyers, advertisements and phony storefronts to attract customers. They might also make presentations through community groups or churches.
Before you share your personal information with any tax person, search the web to see if there have been any scams associated with his name or business. In addition, check websites like ComplaintsBoard.com and RipoffReport.com.
Beware of Phony Charities
Beware of groups that are not legitimate 501(c)(3) organizations trying to get you to donate money so you’ll get a tax deduction. Use the Exempt Organizations Select Check online tool from the IRS to confirm the status of an organization before you write that check and try to claim an income tax deduction.